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Emirates to pay Air India for new flight rights

Dubai's Emirates airline has secured rights to fly to Hyderabad, a growing high-technology centre in southern India, in return for paying a yearly $1 million royalty fee to Air India, a senior government official said on Friday.

Emirates already operates 31 flights a week to India. The new route offers it a chance to profit by carrying the heavy flow of labourers, technicians and engineers travelling between south India and the Gulf.

"Emirates was very keen to start a daily service between Dubai and Hyderabad. In recent bilateral talks, we've given them these rights in return for an annual payment of $1 million," A H Jung, the top bureaucrat in India's civil aviation ministry, told Reuters in an exclusive interview.

Jung said that the royalty payment would go to flagship carrier Air India.

Cash-strapped Air India, with a small fleet of 27 aircraft, has been unable to utilise its flight rights to the fullest to several countries. Thus the Indian government has started charging foreign airlines for new flight entitlements to India instead of seeking reciprocal flying rights.

Recently the German airline Lufthansa agreed to pay an undisclosed sum to Air India for the right to operate seven new flights between Germany and India, including its hi-tech capital of Bangalore.

The Indian government said in a statement in February that the royalty payment from Lufthansa would bring substantial cash returns to Air India.

Lufthansa right now operates 15 flights a week to India. It has been in discussion with New Delhi since 1995 on ways to gain greater access to the Indian market to cash in on growing business and tourism ties between Germany and India.

MONEY OR CODE SHARING

Jung said the Indian government is also driving a much harder bargain for code-sharing deals involving Air India, in which the government is trying to sell a 40 per cent stake.

Only two consortia tabled bids for the airline by the February deadline.

"When foreign airlines approach us for new flight entitlements in India, we ask them: what's in this for Air India?" Jung said.

Code-sharing with foreign airlines allows Air India, which has lost money the past seven straight years, to sell seats on those carriers and cover new destinations without incurring the expense of actually flying there itself.

Lufthansa and Air India are now negotiating a code-sharing arrangement for flights between India and Germany, and Malaysian Airline has already struck a code-share deal with the Indian carrier.

Malaysian Airline System started operating a weekly direct flight from Kuala Lumpur to Hyderabad earlier this month in code-share arrangement with Air India.

The Malaysian carrier, in the latest round of bilateral talks, won landing rights to three new destinations in India - Bombay, India's financial capital, and Bangalore, besides Hyderabad.

India first stumbled on the cash potential of flight rights to the country with the entry of Richard Branson chaired Virgin Atlantic Airways last year.

Branson, keen to get a foothold in the Indian skies, agreed to pay a small fee to Air India for a twice-weekly flight on the busy New Delhi-London route.

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